I find my line work is a lot cleaner when I'm using a pencil and paper, so I work this way quite often. Place a loose piece of paper under your drawing hand to prevent smudging the page.
Once the drawing is finished, you can either import it with a scanner or take a photograph. The latter option generally produces less-satisfactory results, although I'm aware that not everyone has access to a scanner.
Open the Channels window, hold Ctrl and click the RGB layer. This will highlight all of the white space. Inverting the selection will highlight the drawing.
Create a new layer above and fill the highlighted area (Shift+Backspace). You now have a transparent version of drawing, with all of the white space removed
Words: Tony Foti
Tony Foti is a US freelance illustrator who contributes to D&D and Fantasy Flight Games' Star Wars and The Lord of the Rings lines. This article originally appeared in ImagineFX magazine issue 103.